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President Joe Biden has extended the student loan payment pause through January 31, 2022.
Here’s what you need to know.
In a big win for student loan borrowers, Biden extended student loan relief to help student loan borrowers in the wake of the Covid-19 pandemic. Here is what to expect through January 31, 2022:
- No federal student loan payments;
- 0% interest on federal student loans; and
- No collection of student loans in default
This is Biden’s second extension of student loan relief. He initially extended student loan relief in January for eight months through September 30, 2021. Previously, President Donald Trump also extended student loan relief twice. The first extension was from September 30, 2020 to December 31, 2020 and the second was from December 31, 2020 to January 31, 2021. Congress passed the original student loan relief as part of the Cares Act — the $2.2 trillion stimulus package — in response to the Covid-19 pandemic. This is also a win for Sen. Elizabeth Warren (D-MA) and Senate Majority Leader Chuck Schumer (D-NY), who have advocated to extend the student loan payment pause to at least March 31, 2022. Warren said student loan servicers wouldn’t be ready in time for student loan borrowers to make student loan payments if there was no extension.
Student loan borrowers will get $110 billion of student loan cancellation
This week, student loan cancellation has become a hot topic on Capitol Hill. Through January 31, 2022, student loan borrowers collectively will get more than $110 billion of student loan cancellation. Why? As a result of this student loan relief, the U.S. Department of Education says that federal student loan borrowers have saved $5 billion each month during the Covid-19 pandemic since March 2020. Since Biden became president, student loan borrowers have received more than $40 billion of student loan cancellation through September 30. With this new fourth month extension, student loan borrowers will get an additional $20 billion of student loan cancellation. In aggregate, that means federal student loan borrowers will get more than $110 billion of student loan cancellation driven primarily by interest savings (rather than a decrease in their principal student loan balance). Since becoming president, Biden has cancelled $3 billion of student loans. This includes $1.5 billion that Biden cancelled this way.
Student loan payments will resume February 1, 2022
This is the final extension of student loan relief. So, don’t expect another four month extension early next year. With the recent extension of the federal eviction moratorium, Biden has now extended student loan relief as well. The Biden administration has now set a definitive date of February 1, 2022 for student loan repayment to commence. This will help provide certainty to student loan borrowers, who will now have approximately six months to plan for student loan repayment to restart. Expect the U.S. Department of Education to notify you in writing soon about this extension, provide access to resources and explain what it means for your student loans. Why did the Biden administration choose February 1, 2022? Two major student loan servicers are ending their servicing contract with the U.S. Department of Education on December 31, 2021. FedLoan Servicing, also known as the Pennsylvania Higher Education Assistance Agency (PHEAA), announced that it will not renew its 12-year-old contract with the U.S. Department of Education to service federal student loans. PHEAA services student loans for approximately 8.5 million student loan borrowers, which represents about 20% of all federal student loan borrowers. Granite State Management & Resources, which is part of the non-profit New Hampshire Higher Education Association Foundation (NHHEAF) Network, also announced it will end its federal servicing contract as of December 31, 2021. As a result, more than 10 million student loan borrowers will get a new student loan servicer in early 2022. To avoid any transition headaches, the Biden administration wants to wait until February to ensure that no student loan borrower is left behind as a result of getting a new student loan servicer. This extension of student loan relief comes despite a hidden clue that suggested that student loan relief may have expired as planned on September 30.
Student loans: next steps
If you’re a student loan borrower, you can breathe a sigh of relief. In addition to the student loan payment pause, expect Biden and the U.S. Department of Education to focus on improving student loan repayment for student loan borrowers. There are several ongoing initiatives to simplify student loan repayment, reduce bureaucracy, improve the Public Service Loan Forgiveness program, cancel more student loans on a targeted basis, and help more student loan borrowers access student loan forgiveness. Members of Congress also have proposed ways to fix student loan repayment and improve on student loan cancellation.
If you have student loans, it’s never too early to plan for student loan repayment. Don’t wait until the last minute to implement your student loan game plan. Start planning now so you’re ahead of your student loans. Here are some popular options to save money:
Student Loans: More Reading
Student loan cancellation may help more borrowers, but that doesn’t mean Biden will cancel everyone’s student loans
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